On the stress test front, Wednesday dawns quietly. The New York Times reports that the chief administrative officer at Bank of America Corp. (NYSE:BAC), J. Steele Alphin (great name), seems to confirm that the big bank will be short $33.9 billion and that the usual "people briefed on the final results" at Citigroup Inc. (NYSE:C) say it will need between $5 billion and $10 billion. The Financial Times has the Citi number, but nothing on BofA in print, but added the number online. And perhaps most noteworthy of all, The Wall Street Journal in some editions didn't have either story. Later editions have a BofA number ($35 billion) on the front page but no confirmation from BofA, and on Wednesday morning the WSJ.com story still says that "an official announcement is expected after the close of U.S. stock market trading Thursday."
Meanwhile, the blogs are relatively quiet so far on the subject, with the how-could-the-government-negotiate-with-these-creeps meme from earlier in the week still quietly echoing. Felix Salmon at Reuters expresses shock at the BofA number, bewilderment at Alphin's sanguine comments (what's he supposed to do, cry?) and predicts the demise of BofA CEO Ken Lewis.
But what about those leaks? For most of the week, the nationalization crowd argued that the leaks, which were avidly cited and roundly denounced in the blogosphere (a lot like exit polls), were a sign of regulators under the thumb of the banks; and the delay in announcing results was taken as confirmation of weakness.
This view argued that leaks were occurring for two reasons. First, Treasury and the White House were leaking possible numbers for specific banks to test political and stock market waters. Because the administration was afraid of the banks, they wanted to be on secure footing when final results were announced. This seems to be a stretch, if only because the public at large hardly gives a crap that these tests are taking place. As for the stock market, there have been so many numbers leaked that it's a little hard to guess which one the market was rallying around. The second argument is that the banks were leaking to bully the government. Again, this explanation escapes us. Given that the banks are deeply unpopular, why would leaking give them a cudgel against regulators?
Now we have BofA essentially confirming a big number. This is really not a leak at all but an official comment, which would suggest surrender. The likeliest possibility here is that BofA has decided it's better to get ahead of whatever will happen Thursday, and give the market a chance to absorb the news. Who knows? Maybe the folks at BofA think that if its stock takes a beating Wednesday, regulators will cut it a break; anything below $33.9 billion can be taken as a victory, and Lewis can try to keep his job.
Or perhaps this number is an improvement on the $60 billion that floated around earlier. (It may also be that the government leaked the number to the Times to get it out, forcing BofA to respond.) One mystery that remains is why BofA's Alphin didn't speak to the other big papers. The WSJ clearly only scrambled after it saw the Times story -- its first e-mail went out at 11:30 p.m. -- and never did get Alphin.
To add a little perspective on this, recall that on Sunday the FT reported that BofA was making plans to raise $10 billion. BofA called the report "completely inaccurate." If things at BofA weren't already ugly, the bank has now scorched two of three big business papers. Regulators seemed to be untouched.
As for the Citi leaks, again, if they're accurate, then the bank is feeling pretty good, so why not tell the papers and make sure no one at Treasury changes their mind? In the game of relative expectations, Citi trumps BofA, leaving Vikram Pandit slightly more secure, though Salmon is convinced he's gone. Now the big question that remains is Wells Fargo & Co. (NYSE:WFC), which Charlie Munger and Warren Buffett have been lobbying for throughout the week. Wouldn't it be odd if Treasury were less afraid of the banks and more afraid of crossing Munger and Buffett?
